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United: Broken Culture

Oscar Munoz, chief executive officer of United Continental Holdings
Andrew Harrer | Bloomberg | Getty Images
Oscar Munoz, chief executive officer of United Continental Holdings

In the aftermath of the abominable United Airlines incident, allow me to offer some thoughts about customer service, company cultures and the underlying sick process of regulatory capture.

I'm a recovering Parisien. You know the type, sarcastic, seen-it-all, Gauloise hanging from the lower lip. (There are enough tribe members to sustain a site that sells related paraphernalia.)

True Parisian shopkeepers are dismissive of pesky customers unless they're regulars, members of the circle. Our rue du Bac butcher once steered me away from a cut: "No, this one's for the clientèle de passage'', passers-by he'd never seen before and would never see again.

When I was selected to run Apple France more than three decades ago, I had a disdainfully Parisien attitude to customer service. You inserted an interface card backwards and your Apple II no longer boots? Well of course it doesn't…you did it wrong.

After a few combative customer service encounters, I experienced an epiphany: No matter how "wrong" they may be, we're a prosperous business, we can afford to take care of these situations, but we can't afford to let unhappy, affronted customers damage our reputation.

Whenever a call was escalated to my office, I would immediately offer to buy back the customer's machine. The offer was always emphatically declined, so we moved on to arrangements for shipment or perhaps a personal appointment at our service shop. Our business concluded, I would ask if the happy caller had children: "Yes…but why?" "For the t-shirts, of course, a small thank-you for bringing your problem to our attention…what sizes would you like?"

A stray behaviorist in our ranks protested that I shouldn't condition customers to complain, that it would result in more and more jeremiads. I disagreed, claiming that people don't actually like to complain, and, indeed, we never had any scheming or deranged kvetchers.

Over time, a customer service theorem emerged. When a customer brings a complaint, there are two tokens on the table: It's Nothing and It's Awful. Both tokens are always played, so whoever chooses first forces the other to grab the token that's left. For example: Customer claims something's wrong. I try to play down the damage: It's Probably Nothing…are you sure you know what you're doing? Customer, enraged at my lack of judgment and empathy, ups the ante: How are you boors still in business??

But if I take the other token first and commiserate with Customer's complaint: This Is Awful! How could we have done something like this? Dear Customer is left with no choice, compelled to say Oh, it isn't so bad…certainly not the end of the world..

It's simple, it works….even in marriages, I'm told.

There's no downside to taking the It's Awful position. If, on further and calm investigation, the customer is revealed to be seriously wrong, you can always move to the playbook's Upon Further Review page.

Which leads us to United Airlines' customer service catastrophe last week.

It started simply. United Flight 3411 was sold out (not overbooked) and all passengers were seated. At the last moment, four United personnel needed to be ferried from Chicago to Louisville and the ground staff dutifully asked for volunteers to cede their seats.

By Federal Regulation (good luck trying to parse those if you're not an attorney), airlines can offer up to $1,350 plus "other considerations" for each volunteered seat. The auction started, nobody budged; the offer was sweetened, still nothing. For reasons unknown, the compensation stopped at $800 (some say $1,000) and United staff selected four passengers using a secret sauce algorithm.

Three of the "volunteers" disembarked without incident, but the fourth, Dr. David Dao, politely declined.

That's when United's staff made a costly mistake, one that's likely to be measured in hundreds of millions of dollars: They asked Chicago Aviation Security to forcibly remove the "offending" passenger. The video of a bloodied Dr. Dao being dragged in the aisle has been seen millions of times around the world. He ended in the hospital with a concussion, a broken nose and two broken teeth.

It's tempting to focus on United's ground staff — what were they thinking? — but the bigger problem is United's culture, the system of restrictions and permissions that denied the staff the authority to up the volunteer ante yet granted them power to ask for the violent removal of a customer. And in questions of culture, top management is the real culprit. United staff in Chicago showed poor judgment, but their bosses are guilty of having fostered a culture where this behavior is possible if not encouraged.

Speaking of management, we now turn to United CEO Oscar Muñoz and his incomprehensible handling of Dr. Dao's brutal removal. In a letter to United employees, Muñoz reassured his troops that he stood behind them, and that while he "deeply regret[s] this situation", United "had no choice" but to manhandle the"disruptive and belligerent" Dao.

Unsurprisingly, Muñoz's message was universally panned for its tone-deaf, Orwellian language. As Time magazine asked, "United Airlines 'Reaccommodated' a Passenger. Is That the Euphemism of the Year?"

What should he have said? "This is Awful. How could we have let something like this happen? As CEO, this is on me, this was on my watch." There's always time to discover more facts once the dust has settled and re-apportion responsibilities, but by relying on questionable sources — i.e. the United employees, themselves — Muñoz jumped to the wrong conclusions and blamed the victim.

More than 48 hours after the beating, Muñoz offered a stronger apology, close to what he should have said in the first place: "This shouldn't have happened and I'll make sure it never happens again."

Some say Muñoz should fire his head of PR. No. As CEO, Muñoz has final edit on all of the company's PR drafts; he's the one who let the damaging statements go out. (Supreme irony: Just a few weeks ago, PR Week magazine gave Muñoz its Communicator of the Year 2017 award.)

In the meantime, United stock has taken a beating, as has the company's already so-so reputation. Besides the video viewed around the world and the deserved jokes ("Welcome to Southwest, where we beat our competitors, not our passengers"), there will be one or more costly lawsuits.

As expected, politicians are jumping into the fray, demanding answers, pointing fingers. The grand prize goes to New Jersey Governor Chris Christie who wants U.S. Transportation Secretary Elaine Chao to end airline overbooking. This is the same Chris Christie whose Bridgegate scandal cost Oscar Muñoz's predecessor his job. I'm not making this up; see here.

This leads us to the second and more important culture layer: Regulatory capture.

What do our elected solons do once they get to Washington? They love their jobs and their taxpayer-subsidized healthcare and pension. So, they immediately start raising money for reelection. They don't ask average schmucks for money; they go to lobbyists for pharma, Wall Street, insurance, telcos, energy conglomerates…and airlines.

As their part of the courtship, our officials push through the regulations that these companies and industry groups have paid for (and written?), and kill the proposals that they don't like. Indirectly but indisputably, our representatives give the service industry permission to treat paying customers with condescension and abuse. Let's make no mistake, the reaction to the United beating of Dr. Dao is a testament to a powder keg of frustration with airlines' obfuscating rules and customer-hostile behavior. (United's Contract of Carriage, the 38,000 words document that describes its terms of business, is available here, enjoy!)

How many beatings do we need before oligopolistic US airlines change their behavior and treat us as the customers who pay their people's salaries and execs' compensation?

— JLG@mondaynote.com

Read the Monday Note, now in its 10th year. A weekly free (speech) and free (beer) look at the world of tech.

This story originally appeared on Monday Note, and is republished here by permission.